A Framework for Assessing the Commercialization of Photovoltaic Power Generation Open Access
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An effective framework does not currently exist with which to assess the viability of commercializing photovoltaic (PV) power generation in the US energy market. Adopting a new technology, such as utility-scale PV power generation, requires a commercialization assessment framework. The framework developed here assesses the economic viability of a set of alternatives of identified factors. Economic viability focuses on simulating the levelized cost of electricity (LCOE) as a key performance measure to realize `grid parity', or the equivalence between the PV electricity prices and grid electricity prices for established energy technologies. Simulation results confirm that `grid parity' could be achieved without the current federal 30% investment tax credit (ITC) via a combination of three strategies: 1) using economies of scale to reduce the LCOE by 30% from its current value of 3.6 cents/kWh to 2.5 cents/kWh, 2) employing a longer power purchase agreement (PPA) over 30 years at a 4% interest rate, and 3) improving by 15% the "capacity factor", which is the ratio of the total annual generated energy to the full potential annual generation when the utility is continuously operating at its rated output. The lower than commercial-market interest rate of 4% that is needed to realize `grid parity' is intended to replace the current federal 30% ITC subsidy, which does not have a cash inflow to offset the outflow of subsidy payments. The 4% interest rate can be realized through two proposed finance plans: The first plan involves the implementation of carbon fees on polluting power plants to produce the capital needed to lower the utility PPA loan term interest rate from its current 7% to the necessary 4% rate. The second plan entails a proposed public debt finance plan. Under this plan, the US Government leverages its guarantee power to issue bonds and uses the proceeds to finance the construction and operation of PV power plants with PPA loan with a 4% interest rate for a 30-year term instead of the current 15-year average term. Such government-financed PV utilities will sell electricity to the US Government at a lower than retail electricity price as compensation for a favorable interest rate (4% instead of 7%) and a longer PPA term (30 years instead of 15). The life-cycle cash flow simulation of this proposed financial plan ascertains a 20% reduction in PV LCOE. Such cost reduction could be applied as credit to the US government electricity bills with 20% saving. The government could also realize a second compensation from the replaced 30% ITC subsidy because such expenditures would no longer be needed. A comparison between the engineering economy cash flow simulation results of the current utility power PPA practice and the proposed financial plan suggests that the proposed plan would be viable. The simulation results also show that the proposed public debt financial plan does not reach grid parity on its own; rather, it needs to be an integral part of the PV commercialization framework developed in this dissertation.The outcome of this research demonstrates that the effective implementation of the developed framework could facilitate the realization of a commercially successful PV power generation industry.